Shauna Coleman is single. She is employed as an architectural designer for Streamline Design (SD). Shauna wanted to determine her taxable income. She correctly calculated her AGI. However, she wasn’t sure how to compute the rest of her taxable income. She provided the following information with hopes that you could use it to determine her taxable income. a. Shauna paid $4,680 for medical expenses for care from a broken ankle. Also, Shauna’s boyfriend, Blake, drove Shauna (in her car) a total of 115 miles to the doctor’s office so she could receive care for her broken ankle. b. Shauna paid a total of $3,400 in health insurance premiums during the year (not through an exchange). SD did not reimburse any of this expense. Besides the health insurance premiums and the medical expenses for her broken ankle, Shauna had Lasik eye surgery last year and she paid $3,000 for the surgery (she received no insurance reimbursement). She also incurred $450 of other medical expenses for the year. c. SD withheld $1,800 of state income tax, $7,495 of Social Security tax, and $14,500 of federal income tax from Shauna’s paychecks throughout the year. d. In 2018, Shauna was due a refund of $250 for overpaying her 2017 state taxes. On her 2017 state tax return that she filed in April of 2018, she applied the overpayment towards her 2018 state tax liability. She estimated that her state tax liability for 2018 will be $2,300. e. Shauna paid $3,200 of property taxes on her personal residence. She also paid $500 to the developer of her subdivision, because he had to replace the sidewalk in certain areas of the subdivision. f. Shauna paid a $200 property tax based on the state’s estimate of the value of her car. g. Shauna has a home mortgage loan in the amount of $220,000 that she secured when she purchased the home. The home is worth about $400,000. Shauna paid interest of $12,300 in interest on the loan this year. h. Shauna made several charitable contributions throughout the year. She contributed stock in ZYX Corp. to the Red Cross. On the date of the contribution, the FMV of the donated shares was $1,000 and her basis in the shares was $400. Shauna originally bought the ZYX Corp. stock in 2008. Shauna also contributed $300 cash to State University and religious artifacts she has held for several years to her church. The artifacts were valued at $500 and Shauna’s basis in the items was $300. Shauna had every reason to believe the church would keep them on display indefinitely. Shauna also drove 200 miles doing church-related errands for her minister. Finally, Shauna contributed $1,200 of services to her church last year. i. Shauna paid $250 in investment advisory fees and another $150 to have her tax return prepared (that is, she paid $150 in 2018 to have her 2017 tax return prepared). j. Shauna is involved in horse racing as a hobby. During the year, she won $2,500 in prize money and incurred $10,000 in expenses. She has never had a profitable year with her horse racing activities, so she acknowledges that this is a hobby for federal income tax purposes. k. Shauna sustained $2,000 in gambling losses over the year (mostly horse-racing bets) and only had $200 in winnings. Required: A. Determine Shauna’s taxable income and complete page 2 of Form 1040 (through taxable income, line 43) and Schedule A assuming her AGI is $107,000. B. Determine Shauna’s taxable income and complete page 2 of Form 1040 (through taxable income, line 43) and Schedule A assuming her AGI is $207,000
> Alice is single and self-employed in 2018. Her net business profit on her Schedule C for the year is $140,000. What is her self-employment tax liability and additional Medicare tax liability for 2018?
> Rasheed works for Company A, earning $350,000 in salary during 2018. Assuming he is single and has no other sources of income, what amount of FICA tax will Rasheed pay for the year?
> Brooke, a single taxpayer, works for Company A for all of 2018, earning a salary of $50,000. a. What is her FICA tax obligation for the year? b. Assume Brooke works for Company A for half of 2018, earning $50,000 in salary and she works for Company B f
> In 2018, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe’s taxable income is $1,090,000, and they itemize their deductions as follows: real property taxes of $10,000, charitable contributi
> In 2018, Janet and Ray are married filing jointly. They have five dependent children under 18 years of age. Janet and Ray’s taxable income is $2,400,000, and they itemize their deductions as follows: state income taxes of $10,000 and mortgage interest ex
> Steve’s tentative minimum tax (TMT) for 2018 is $245,000. What is his AMT if a. His regular tax is $230,000? b. His regular tax is $250,000?
> In 2018, Juanita is married and files a joint tax return with her husband. What is her tentative minimum tax in each of the following alternative circumstances? a. Her AMT base is $100,000, all ordinary income. b. Her AMT base is $250,000, all ordinary i
> Corbett’s AMTI is $600,000. What is his AMT exemption under the following alternative circumstances? a. He is married and files a joint return. b. He is married and files a separate return. c. His filing status is single. d. His filing status is head o
> Olga is married and files a joint tax return with her husband. What amount of AMT exemption may she deduct under the following alternative circumstances? a. Her AMTI is $390,000. b. Her AMTI is $1,080,000. c. Her AMTI is $1,500,000.
> How was the income tax formula for individuals changed for 2018 by the Tax Cuts and Jobs Act?
> In 2018, Sven is single and has $120,000 of regular taxable income. He itemizes his deductions as follows: real property tax of $2,000, state income tax of $4,000, mortgage interest expense of $15,000 (acquisition debt of $300,000). He also has a positiv
> In 2018, Nadia has $100,000 of regular taxable income. She itemizes her deductions as follows: real property taxes of $1,500, state income taxes of $2,000, and mortgage interest expense of $10,000 (acquisition debt of $200,000). In addition, she receives
> Sylvester files as a single taxpayer during 2018. He itemizes deductions for regular tax purposes. He paid charitable contributions of $7,000, real estate taxes of $1,000, state income taxes of $4,000 and mortgage interest of $2,000 on $30,000 of acquisi
> Brooklyn files as a head of household for 2018). She claimed the standard deduction of $18,000 for regular tax purposes. Her regular taxable income was $80,000. What is Brooklyn’s AMTI?
> In 2018, Carson is claimed as a dependent on his parent’s tax return. Carson’s parents provided most of his support. What is Carson’s tax liability for the year in each of the following alternative circumstances? a. Carson is 17 years old at year-end and
> In 2018, Sheryl is claimed as a dependent on her parent’s tax return. Sheryl did not provide more than half her own support. What is Sheryl’s tax liability for the year in each of the following alternative circumstances? a. She received $7,000 from a par
> Henrich is a single taxpayer. In 2018, his taxable income is $450,000. What is his income tax and net investment income tax liability in each of the following alternative scenarios? a. All of his income is salary from his employer. b. His $450,000 of tax
> Lacy is a single taxpayer. In 2018, her taxable income is $40,000. What is her tax liability in each of the following alternative situations? a. All of her income is salary from her employer. b. Her $40,000 of taxable income includes $1,000 of qualified
> In 2018, Jasmine and Thomas, a married couple, have taxable income of $150,000. If they were to file separate tax returns, Jasmine would have reported taxable income of $140,000 and Thomas would have reported taxable income of $10,000. What is the couple
> John and Sandy Ferguson got married eight years ago and have a seven-year-old daughter Samantha. In 2018, John worked as a computer technician at a local university earning a salary of $152,000, and Sandy worked part-time as a receptionist for a law firm
> Troy operates an editorial service that employs two editors. These editors often entertain authors to encourage them to use Troy's service. This year Troy reimbursed the editors $3,000 for the cost of meals and $6,200 for the cost of entertaining authors
> Reba Dixon is a fifth-grade school teacher who earned a salary of $38,000 in 2018. She is 45 years old and has been divorced for four years. She received $1,200 of alimony payments each month from her former husband (divorced in 2016). Reba also rents ou
> In 2018, Jack is single two children, ages 10 and 12. Jack works full-time and earns an annual salary of $195,000 as a consultant.. Jack files as a head of household and does not itemize his deductions. In the fall of this year, he was recently offered a
> George recently received a great stock tip from his friend, Mason. George didn’t have any cash on hand to invest, so he decided to take out a $20,000 loan to facilitate the stock acquisition. The loan terms are 8 percent interest with interest-only payme
> On January 1 of year 1, Nick and Rachel Sutton purchased a parcel of undeveloped land as an investment. The purchase price of the land was $150,000. They paid for the property by making a down payment of $50,000 and borrowing $100,000 from the bank at an
> Shaun bought 300 shares of Dental Equipment, Inc. several years ago for $10,000. Currently the stock is worth $8,000. Shaun’s marginal tax rate this year is 24 percent, and he has no other capital gains or losses. Shaun expects to have a marginal rate of
> Christopher sold 100 shares of Cisco stock for $5,500 in the current year. He purchased the shares several years ago for $2,200. Assuming his marginal ordinary income tax rate is 24 percent, and he has no other capital gains or losses, how much tax will
> For 2018, Sherri has a short-term loss of $2,500 and a long-term loss of $4,750. a. How much loss can Sherri deduct in 2018? b. How much loss will Sherri carryover to 2019 and what is the character of the loss carryover?
> Diana and Ryan Workman were married on January 1 of last year. Diana has an eight-year-old son, Jorge, from her previous marriage. Ryan works as a computer programmer at Datafile Inc. (DI) earning a salary of $96,000. Diana is self-employed and runs a
> Consider the following letter and answer Shady’s question. To my friendly student tax preparer: Hello, my name is Shady Slim. I understand you are going to help me figure out my gross income for the year…whatever that means. It’s been a busy year and I’m
> Ken is 63 years old and unmarried. He retired at age 55 when he sold his business, Understock.com. Though Ken is retired, he is still very active. Ken reported the following financial information this year. Assume Ken files as a single taxpayer. Dete
> Explain why the medical expense provisions are sometimes referred to as “wherewithal” deductions and how this rationale is reflected in the limit on these deductions.
> Grayson is in the 24 percent tax rate bracket and has the sold the following stocks in 2018: Date Purchased Basis Date Sold Amount Realized Stock A 1/23/1994 $7,250 7/22/2018 $4,500 Stock B 4/10/2018 14,000 9/13/2018 17,500 Stock C
> Matt and Meg Comer are married and file a joint tax return. They do not have any children. Matt works as a history professor at a local university and earns a salary of $64,000. Meg works part-time at the same university. She earns $31,000 a year. The co
> Matt and Lori were divorced in 2016. Pursuant to the divorce decree Matt receives $10,000 of alimony each month. Use an available tax service to determine if the alimony Matt receives is taxable. Would your answer change if Matt and Lori still live toget
> Dahlia is in the 32 percent tax rate bracket and has purchased the following shares of Microsoft common stock over the years: Microsoft common stock Date Purchased Shares Basis 7/10/2008 400 $12,000 4/20/2009 300 $10,750 1/29/2010 500
> John bought 1,000 shares of Intel stock on October 18, 2014 for $30 per share plus a $750 commission he paid to his broker. On December 12, 2018, he sells the shares for $42.50 per share. He also incurs a $1,000 fee for this transaction. a. What is John
> Hayley recently invested $50,000 in a public utility stock paying a 3 percent annual dividend. If Hayley reinvests the annual dividend she receives net of any taxes owed on the dividend, how much will her investment be worth in four years if the dividend
> Dana intends to invest $30,000 in either a Treasury bond or a corporate bond. The Treasury bond yields 5 percent before tax and the corporate bond yields 6 percent before tax. Assuming Dana’s federal marginal rate is 24 percent and her marginal state rat
> Matt recently deposited $20,000 in a savings account paying a guaranteed interest rate of 4 percent for the next 10 years. If Matt expects his marginal tax rate to be 22 percent for the next 10 years, how much interest will he earn after-tax for the firs
> Katie is a shareholder in Engineers One, a civil engineering company. This year, Katie’s share of net business income from Engineers One is $200,000. Assume that Katie’s allocation of wages paid by Engineers One to its employees is $300,000 and her alloc
> Roquan is an attorney and practices as a sole proprietor. This year, Roquan had net business income of $90,000 from his law practice. Assume that Roquan pays $40,000 wages to his employees, he has $10,000 of property (unadjusted basis of equipment he pur
> Compare how the return of capital principle applies when: (1) a taxpayer sells an asset and collects the sale proceeds all immediately, and (2) a taxpayer sells an asset and collects the sale proceeds over several periods (installment sales). If Congress
> Stephanie is 12 years old and often assists neighbors on weekends by babysitting their children. Calculate the 2018 standard deduction Stephanie will claim under the following independent circumstances (assume that Stephanie’s parents will claim her as a
> During 2018, your clients, Mr. and Mrs. Howell, owned the following investment assets: Investment Assets Date Acquired Purchase Price Broker’s Commission Paid at Time of Purchase 300 shares of IBM common 11/22/2015 $10,350 $100 200 shares of
> Fred currently earns $9,000 per month. Fred has been offered the chance to transfer for three to five years to an overseas affiliate. His employer is willing to pay Fred $10,000 per month if he accepts the assignment. Assume that the maximum foreign earn
> Trevor is a single individual who is a cash-method calendar-year taxpayer. For each of the next two years (year 1 and year 2), Trevor expects to report AGI of $80,000, contribute $8,000 to charity, and pay $2,800 in state income taxes. a. Estimate Trevo
> Anne’s marginal income tax rate is 32 percent. She purchases a corporate bond for $10,000 and the maturity, or face value, of the bond is $10,000. If the bond pays 5 percent per year before taxes, what is Anne’s annual after-tax rate of return from the b
> Joe and Jessie are married and have one dependent child, Lizzie. Lizzie is currently in college at State University. Joe works as a design engineer for a manufacturing firm while Jessie runs a craft business from their home. Jessie’s cr
> Tiffany is unmarried and has a 15-year-old qualifying child. Tiffany has determined her tax liability to be $3,525, and her employer has withheld $1,500 of federal taxes from her paycheck. Tiffany is allowed to claim a $2,000 child tax credit for her qua
> Camille Sikorski was divorced last year. She currently owns and provides a home for her 15-year-old daughter. Kaly lived in Camille’s home for the entire year and Camille paid for all the costs of maintaining the home. She received a salary of $105,000 a
> Demarco and Janine Jackson have been married for 20 years and have four children who qualify as their dependents (Damarcus, Janine, Michael, and Candice). The couple received salary income of $100,000, qualified business income of $10,000 from an investm
> Peggy is a rodeo clown, and this year she expended $1,000 on special “funny” clothes and outfits. Peggy would like to deduct the cost of these clothes as work-related because she refuses to wear the clothes unless she is working. Under what circumstances
> Marc and Michelle are married and earned salaries this year of $64,000 and $12,000, respectively. In addition to their salaries, they received interest of $350 from municipal bonds and $500 from corporate bonds. Marc contributed $2,500 to an individual r
> Jeremy and Alyssa Johnson have been married for five years and do not have any children. Jeremy was married previously and has one child from the prior marriage. He is self-employed and operates his own computer repair store. For the first two months of
> L. A. and Paula file as married taxpayers. In August of this year they received a $5,200 refund of state income taxes that they paid last year. How much of the refund, if any, must L. A. and Paula include in gross income under the following independent s
> This year Evan graduated from college, and took a job as a deliveryman in the city. Evan was paid a salary of $67,300 and he received $700 in hourly pay for part-time work over the weekends. Evan summarized his expenses below. Calculate Evanâ
> Last year Acme paid Ralph $15,000 to install a new air-conditioning unit at its headquarters building. The air conditioner did not function properly, and this year Acme requested that Ralph return the payment. Because Ralph could not repair one critical
> Elroy, who is single, has taken over the care of his mother Irene in her old age. Elroy pays the bills relating to Irene’s home. He also buys all her groceries and provides the rest of her support. Irene has no gross income. a. What is Elroy’s filing sta
> Mel and Cindy Gibson’s 12-year-old daughter Rachel was abducted on her way home from school on March 15, 2018. Police reports indicated that a stranger had physically dragged Rachel into a waiting car and sped away. Everyone hoped that the kidnapper and
> Hank, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Hank typically requires his clients to pay his bills immediately upon receipt. Assume hi
> Describe the consequences for failure to file a tax return and late payment of taxes owed.
> Using the facts from the previous problem, when should Hank send the bill if he expects his marginal tax rate to be 35 percent next year? 24 percent next year? Data from Problem 44: Hank, a calendar-year taxpayer, uses the cash method of accounting for
> All else being equal, should taxpayers prefer to exclude income or defer it? Why?
> Using the facts in problem 43, what interest rate does Surething Inc. need to offer to make Hugh indifferent between investing in the two bonds? Data from problem 43: Hugh has the choice between investing in a City of Heflin bond at 6 percent or a Sure
> Using the facts from the previous problem, when should Reese pay the bill if she expects her marginal tax rate to be 35 percent next year? 24 percent next year? Data from Problem 42: Reese, a calendar-year taxpayer, uses the cash method of accounting f
> What is a §481 adjustment, and what is the purpose of this adjustment?
> Using the facts in problem 40, if Scot and Vidia earn an additional $80,000 of taxable income, what is their marginal tax rate on this income? Ho1w would your answer differ if they, instead, had $80,000 of additional deductions? Data from problem 40: S
> Manny, a calendar-year taxpayer, uses the cash method of accounting for his sole proprietorship. In late December he performed $20,000 of legal services for a client. Manny typically requires his clients to pay his bills immediately upon receipt. Assume
> Tim is a single, cash-method taxpayer with an AGI of $50,000. In April of this year Tim paid $1,020 with his state income tax return for the previous year. During the year, Tim had $5,400 of state income tax and $18,250 of federal income tax withheld fro
> Simpson, age 45, is a single individual who is employed full-time by Duff Corporation. This year Simpson reports AGI of $50,000 and has incurred the following medical expenses: a. Calculate the amount of medical expenses that will be included with Simp
> In each of the following independent cases, indicate the amount (1) deductible for AGI, (2) deductible from AGI, and (3) neither deductible for nor deductible from AGI before considering income limitations or the standard deduction. a. Ted paid $50 rent
> This year Jack intends to file a married-joint return. Jack received $167,500 of salary, and paid $5,000 of interest on loans used to pay qualified tuition costs for his dependent daughter, Deb. This year Jack has also paid moving expenses of $4,300 and
> Betty operates a beauty salon as a sole proprietorship. Betty also owns and rents an apartment building. This year Betty had the following income and expenses. Determine Betty’s AGI and complete page 1 of Form 1040 for Betty. You may as
> Explain how cost of goods sold is treated when a business sells inventory.
> Aishwarya’s husband passed away in 2017. She needs to determine whether Jasmine, her 17-year-old stepdaughter who is single, qualifies as her dependent in 2018. Jasmine is a resident but not a citizen of the United States. She lived in Aishwarya’s home f
> Rank the following three single taxpayers in order of the magnitude of taxable income (from lowest to highest) and explain your results.
> All else being equal, would a taxpayer with passive losses prefer to have wage income or passive income?
> Jack operates a plumbing business as a sole proprietorship and uses the cash method. Besides providing plumbing services, Jack also sells plumbing supplies to homeowners and other plumbers. The sales of plumbing supplies constitute less than $20,000 per
> Discuss the treatment of suspended passive losses upon the sale of a passive activity?
> David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,700. They have made prepayments of $1,500 and also have a child tax credit of $2,000. What is the amount of their tax refund or taxes due?
> Jeremy earned $100,000 in salary and $6,000 in interest income during the year. Jeremy’s employer withheld $11,200 of federal income taxes from Jeremy’s paychecks during the year. Jeremy has one qualifying dependent child who lives with him. Jeremey qua
> Don Juan, a single taxpayer, is the sole owner, of DJ’s Inc., an S Corporation. This year, DJ’s Inc. incurred a massive $600,000 business loss, all of which is allocable to Don Juan as the sole shareholder. Assume that $600,000 loss is not limited by the
> Under what circumstances would business income from an accounting practice qualify for the deduction for qualified business income?
> Clem and Ida have been married for several years, but in 2018 they finalized their divorce. In the divorce decree, Clem agreed to deed his car to Ida and pay Ida $10,000 per year for four years (but not beyond her death). Will either of these transfers q
> Whether a business expense is “reasonable in amount” is often a difficult question. Explain why determining reasonableness is difficult and describe a circumstance where reasonableness is likely to be questioned by the IRS.
> Describe what is meant by qualified business income for purposes of the deduction for qualified business income.
> How do two taxpayers determine who has priority to claim a person as a dependent if the person is a qualifying child of both taxpayers when neither taxpayer is a parent of the child (assume the child does not qualify as a qualifying child for either pare
> Compare and contrast the different year-ends available to sole proprietorships, flow-through entities, and C corporations.
> What are some of the common examples of the conversion strategy?
> If a person meets the qualifying relative tests for a taxpayer, is that person automatically considered to be a dependent of the taxpayer?
> Benjamin, a self-employed bookkeeper, takes a CPA review course ($1,500 cost) to help prepare for the CPA exam. a. Use an available tax research service to determine if Benjamin may deduct the cost of the CPA exam course. b. Write a memo communicating th
> Using an available tax service or the Internet, identify three basic tax planning ideas or tax tips suggested for year-end tax planning. Which basic tax strategy from this chapter does each planning idea employ?
> Christopher is a cash-method, calendar-year taxpayer, and he made the following cash payments related to his business this year. Calculate the after-tax cost of each payment assuming Christopher has a 37 percent marginal tax rate. a) $500 fine for speed
> Tammy teaches elementary school history for the Metro School District. In 2018 she has incurred the following expenses associated with her job: Noncredit correspondence course on history ………………….$ 900 Teaching cases for classroom use…………………………………….1,800
> What is the kiddie tax? Explain.
> Simon lost $5,000 gambling this year on a trip to Las Vegas. In addition, he paid $2,000 to his broker for managing his $200,000 portfolio, and $1,500 to his accountant for preparing his tax return. In addition, Simon incurred $2,500 in transportation co
> Michelle operates a food truck. Indicate the amount (if any) that she can deduct as an ordinary and necessary business deductions in each of the following situations and explain your solution. a) Michelle moves her food truck between various locations o
> Five years ago, Kate purchased a dividend-paying stock for $10,000. For all five years, the stock paid an annual dividend of 4 percent before tax and Kate’s marginal tax rate was 24 percent. Every year Kate reinvested her after-tax dividends in the same
> What is the general rule for how many authorities a research memo should discuss?
